Below are today’s likely price locations for buy and sell stop orders for the active Comex gold and silver futures markets. The asterisks (**) denote the most critical stop order placement level of the day (or likely the location where the highest concentration of stop orders will be placed that day).
Below is a detailed explanation of stop orders and why it can be beneficial for a trader to know in advance where they are likely to be.
Stop orders defined
Stop orders can be used in trading markets for three purposes: First, to minimize a loss on a long or short position (protective stop). Second: To hedge a profit from an existing long or short position (protective stop). Third, open a new long or short position. A buy stop order is placed above the market and a sell stop order is placed below the market. Once the stop price is reached, the order is treated like a “market order” and executed at the best possible price.
Most stop orders are located and placed based on key technical support or resistance levels on the daily chart, the breach of which would significantly change the short-term technical condition of that market.
By having a good idea in advance of where the buy and sell stops are located, an active trader can get a better idea of at what price level the buying or selling pressure in that market will be reinforced.
The main advantage of using protective stops is that before you start a trade, you have a pretty good idea of how to exit the trade if it is a loss. If the trade becomes a winner and profits start to accumulate, you may want to use “trailing stops,” where protective stops are adjusted to lock in a profit should the market turn against your position.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; However, neither Kitco Metals Inc. nor the author can guarantee this accuracy. This article is for informational purposes only. It is not a request to exchange goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no liability for any loss and/or damage arising from the use of this publication.